China and Iran officially stated they would boost their energy and political cooperation as part of a 25-year strategic partnership agreement at a time when the U.S. is looking to sanction covert Iranian oil exports to China.
This weekend, Iran and China signed the strategic partnership deal to expand relations in areas such as energy, infrastructure, industry, and technology, the office of the Iranian president said in a statement.
The two countries also pledged to boost cooperation in fossil fuels and alternative energy, “security of demand and supply as well as transfer and transportation of fossil fuels and the Chinese side shall consider financing and investing in the up –and-downstream projects of the energy industries in Iran and the Iranian side shall provide the necessary facilitations and support in this respect,” Iran said.
In recent weeks, various reports have suggested that China has been considerably boosting its crude oil imports from Iran—so much so that the ports in the Shandong province, where most independent refiners are based, are experiencing tanker traffic congestions. Increased buying from China has provided more incentive for Iranian oil exports.
According to some estimates, China has been taking in some 856,000 bpd of Iranian crude this month—a 129-percent surge compared to February.
China has never actually stopped buying crude oil from the Islamic Republic, even after the Trump Administration slapped sanctions on Iran’s oil sales in 2018, warning buyers to stay away from Iranian crude or risk being sanctioned and cut off from the U.S. banking system.
The Biden Administration warned China earlier this month that it would not turn a blind eye to rising Iranian oil exports to Chinese ports, the Financial Times reported, citing a senior Biden administration official. According to the report, Washington has not missed the substantial increase in Iranian crude shipments to China. The U.S. has reminded Beijing that there are still sanctions in place against the Islamic Republic.
By Tsvetana Paraskova for Oilprice.com
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The deal will be underpinned by their shared geopolitical ambitions, growing trade between them expected to reach $600 bn over the next decade, China’s Belt and Road Initiative (BRI) in which China has allocated a special place for Iran and oil and energy cooperation between them.
Iran has a three-pronged grand strategy. The first prong is to become a nuclear power. The second is to be the regional power of the Gulf par excellence and the third is to eject US military presence from Iraq, Syria and the whole Gulf region.
China on the other hand has global ambitions of leading a multi-polar New World Order and becoming the dominant power in the world underpinned by its Strategic alliance with Russia with the petro-yuan replacing the petrodollar as the main currency of the global oil trade.
And despite US warnings, China has been importing substantial volumes of Iranian crude approaching 1.0 million barrels a day (mbd) in defiance of US sanctions. China made it clear that it neither recognizes US sanctions nor has the intention to comply with them.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London